Bank reforms and its implication on the nigerian economy

This study examined the impact of financial sector reforms on the Nigerian economy, utilizing annual time series data from 1987 to 2014. Financial reforms variables of interest rate, recapitalization, consolidation, credit to private sector, loans to deposit ratio and the ratio of non-performing loans were regressed on economic growth, represented by the gross domestic product. The data were analyzed using the Ordinary Least Squares (OLS) regression method. The results revealed that financial reforms, interest rate and the ratio of private sector credit to GDP have significant impact on economic growth in Nigeria. However, loans to deposit ratio and non-performing loans to total loans ratio showed negative relationships with Nigeria’s economic growth. Accordingly, the study recommends a regime of attractive interest rate on savings so as to attract more savings, leading to accumulation of large amount of savings for investment. Also, there should be a deliberate incentivization of credit to the private sector of the Nigerian economy in order to increase real sector investment that will grow the economy. Finally, the enforcement of effective risk management mechanism that moderates loans portfolio at risk to reduce non-performing loans, preserve depositors’ funds and maximize loan interest earnings to improve the profitability and stability of banks should be institutionalized (Word Count, 205).